Thanks-I have a similar question. An individual taxpayer was audited by IRS and the auditor didn't bother to look at the wage and income transcript. As a result, the auditor understated wage income by $114 due to an omitted W-2.  Even though the W-2 was omitted from the original return and it was on the wage and income transcript, the auditor overlooked it. The audit is over and taxpayer paid tax on audit from final determination letter. Here is the problem: Taxpayer needs to amend the CA return due to changes on federal audit. If we do the return correctly, we have to increase federal AGI by $114 over the auditor's final determination letter AGI.  Is that acceptable? Or is there a place in Lacerte to mark the $114 W-2 as non-taxable to federal in order to match the final determination letter fed AGI and show the $114 as taxable on the CA amended return?